The IT industry is just getting more exciting.
Hot off the heels of IBM’s sale of its x86 server business to
Lenovo, providing the momentum for Lenovo to repeat its success in 2005 when it
acquired IBM’s PC division to become the number one vendor, HP makes a major
announcement to spin off its PC and printer division into a separate company.
1.WHAT IS THE SPLIT
2.WHY SPLIT
"The decision to separate into two market-leading companies underscores our commitment to the turnaround plan," said Whitman. "It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-tern value for shareholders."
Former chief executive Leo Apotheker had proposed the move in
2011, 6 years after IBM sold its PC business.
It happened at the same time that HP’s disastrous acquisition of the
British software company Autonomy.
Eventually, HP held on to its PC business amid shareholder pressure,
resulting in Apotheker’s departure and Whitman’s appointment. Meg Whitman who joined 3 years ago to turn HP’s
fortunes around had dismissed her predecessor’s plan to carve up the firm but
has now changed her mind in the fourth year of her five-year turnaround plan.
HP expects to complete the split
of HP into two public companies by end of 2015 fiscal year. Shareholders will automatically own shares in
both companies.
- Hewlett-Packard Enterprise to cover corporate hardware and services, which Whitman will head up, and
- HP Inc to comprise the PC and printer units, to be headed by Dion Weisler (the current executive vice-president of HP's printing and personal computing division). Whitman will be the chairman of the HP Inc board, thereby retaining influence in both businesses.
2.WHY SPLIT
"The decision to separate into two market-leading companies underscores our commitment to the turnaround plan," said Whitman. "It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-tern value for shareholders."
3. IMPACT OF SPLIT
HP’s role in the IT market has been becoming increasingly unclear – with parts of its business moving toward growth areas, while others are being optimized to compete on the last era’s competitive battlefield. This left the company in a tough spot, where new innovation efforts were often overshadowed by large legacy challenges. HP has been addressing this through aggressive restructuring, ultimately shedding as many as 55,000 jobs by the end of FY2015.
Whether HP’s efforts to reduce complexity and be more nimble with
two large companies remains to be seen.
There are still many of the HP businesses that are not synergistic with
different levers for success or where potential partners are unable to fit
strategically with the company.
4. WHAT'S NEXT
Just when HP struck out at IBM by blatantly advertising that IBM customers and business partners should be worried about the x86 business sale to Lenovo, HP has now plunged into deeper uncertainty with their own company split.
It would be important for HP to quickly establish how different
they will be after the split and what is the desired perception of HP to the world.
Nice analogy. I am more worried about Whitman's half of HP marrying EMC now.
ReplyDeleteBen Kepes wrote in Forbes that HP and EMC will be a "marriage of convenience" and "it would be a nightmare". We hear the deal is now 50-50. But I think IBM does not need to be worried as IBM has the stronger products and deeper understanding of enterprise infrastructure across servers, storage, software and new areas of cloud and big data analytics. IBM is #1 in Software Defined Storage by IDC last quarter, #1 in All Flash by Garter and IBM is the leader in Gartner's Magic Quadrant for new solid-state arrays.
DeleteAgnes Oon: Interesting observation and insightful
ReplyDeleteHello Agnes, so nice to hear from you whom I admire for your leadership in excellence committee
DeleteMatthew Tan: the answer lies in the future. If the P/E ratio is better after the split in 1 year timeframe and achieved greater percentage growth than when they are one, then its better, and if not, then its not better :) The truth does not lies in the split or remain as one - its always the believe/faith of the board of investors on which strategy will give them the returns they desire. By believing in their decision very much, things can happen their way. The sentient beings and organisations at times have to split to pursue a better future, or they remain together when circumstances are good. This is the law of natural survival and selection (to be together or to be split).
ReplyDeleteThanks Matthew for your comment. Yes the P/E ratio rules the stock market and many listed corporations. Let's watch the future.
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